National 7 (Spotlight Weekly)

Budding Business

The insurance business is growing steadily amid various difficulties and challenges

By A CORRESPONDENT

Although the economic condition of the country witnessed a sharp decline, the insurance business has been able to register noteworthy growth in the last couple of years.

There are currently 18 different insurance companies – including one branch of American and three branches of Indian companies – in the country at present. Out of them, one is fully government controlled – Rastriya Beema Sansthan – and another semi-government company. Rest are private sector ventures. Thirteen companies deal in non-life sector, three in life sector while two companies deal in both.

According to the figures for the fiscal year 2058/59, the insurance companies have collected over Rs. 1.01 billion in life (35 percent) and Rs 1.88 billion in non-life (65 percent). The premium in life sector has grown steadily from its share of 27.5 percent (in 2056/57) to 35 percent (in 2058/59).

The growth of the insurance premium has been remarkable in the last couple of years. The amount grew by 14.84 percent in 2056/57, 19.55 percent in 2057/58 and 35.07 percent in 2058/59. The total premium (life and non-life) in 2056/57 was Rs 1.79 billion.

The bulk of the existing life insurance – over 62 percent – is covered by the RBS while the non-life sector is more evenly spread out with private and joint ventures also performing equally well. Still, the RBS leads also the non-life pack by capturing nearly 11 percent of the market share.

The insurance is surely an upcoming and emerging business in Nepal. It employs around 3000 people directly and 10,000 thousand people indirectly.

The insurance entrepreneurs, however, say that there is more room for expansion of this sector. “The market potential of Nepal is of more than five billion. Certain fundamental changes in the act, policy and attitude can help double the market size''- said Rajendra Kumar Khetan, a newly elected president of the Nepal Insurance Association (NIA).

The regulatory body - Insurance Board - has been working and supervising the insurance market. ''I will work closely with Insurance Board and Finance Ministry for the growth of the industry,'' said Khetan.

The insurance entrepreneurs have said that the sector faces many issues that need to be properly to facilitate its further growth. “Among others, proper tariff, policy wording, underwriting guidelines are expected from the board,” an insurance entrepreneur added. The board currently has published tariff for Motor, Fire and Marine only. “The premium rates under fire tariff has been revised (mostly reduced) at a time when the degree of risk was increasing. Likewise, the motor tariff seems unpractical as it has not been revised for a long time,” complained the entrepreneur.

The importance of insurance is greatly highlighted at a time when terrorist threats are growing in the country putting even the national economy in jeopardy. If industrialists are backed up by strong insurance force, the problems thrown by the insurgency and insecurity can be easily overcome.

At present, there is a provision of Terrorism Pool (for insurance) in the country. The risks of riot, strike, malicious damage, sabotage and terrorism are handled by the Nepal Terrorism Pool for 30% on quota share basis. “But even after one and half years of its establishment, the pool does not seem to function properly,” said Khetan. “The procedure of premium collection for and claim recoveries from the pool are still not managed properly.”

The entrepreneurs also criticize the imposition of 1 percent service charge by the board saying it is too high when the market is poised to expand. They say that the board needs to provide necessary and suitable service to Insurers, Insured, Insurance Agents and other concerned parties.